Company Reports

Zoom Video Communications’ mission is "to make video communications frictionless," which it accomplishes with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. More recently, Zoom introduced a phone system and a contact center solution. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the pandemic lockdowns demonstrated the strength of the solutions, which combined with an expanding portfolio help establish a narrow moat.

Narrow-moat Zoom reported good fourth-quarter fiscal 2024 results that were above our expectations on the top- and bottom line, while the fiscal 2025 outlook was largely in line with what we anticipated. We see results as a continuation of trends from last quarter, with enterprise growth outperforming the corporate average, but still decelerating. Importantly, management believes the second quarter will be the trough for revenue growth and expects to see modest top-line acceleration in the second half of the year. Zoom also highlighted strength in its fledgling contact center business, which is positive, as it carries an attractive price point to help drive revenue growth. Last, the board authorized a new $1.5 billion share repurchase. Given in-line guidance, we see little reason to make material changes to our model. Thus, we are maintaining our fair value estimate of $89 per share and see the stock as undervalued.

Narrow-moat Zoom reported a good fiscal third quarter, beating our expectations on both the top and bottom lines, while the fourth-quarter outlook was in line with what we anticipated. Key developments this quarter include the continued decline in online average monthly churn to 3.0%, which is a new low and clearly demonstrates the pandemic effects are a thing of the past; a slowdown in in enterprise customer additions, which we think is consistent with continued macroeconomic uncertainty; and approximately 7 million phone seats and 700 contact center customers, both of which are in line with our analysis. Given in-line guidance, we see little reason to make material changes to our model, especially ahead of fiscal 2025 guidance, which we expect management to provide on the fourth-quarter earnings call. Thus, we are maintaining our fair value estimate of $89 per share, and see shares as undervalued.

Zoom Video Communications says its mission is "to make video communications frictionless," which it seeks to accomplish with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the pandemic lockdowns demonstrated the strength of the solutions, which combined with an expanding portfolio helps establish a narrow moat.

Narrow-moat Zoom reported strong fiscal second-quarter results that were meaningfully ahead of our expectations on both the top and bottom lines, while the full-year outlook was raised approximately in line with upside in the quarter. We see two important new and positive disclosures in that Zoom phone reached roughly $500 million on an annualized run rate basis and Zoom contact center surpassed 500 customers in just six quarters. Enterprise remains solid but continues to decelerate, while significant improvements in the online business seem to have plateaued even as management sees no change in the overall demand environment. We modestly lowered our estimates for revenue growth over the next several years based on continued deceleration in enterprise and a pause in online improvements. As a result, we are lowering our fair value estimate to $89 per share, from $95 previously. However, we still see shares as undervalued.

Narrow-moat Zoom reported strong fiscal first-quarter results ahead of our expectations on both the top and bottom lines, featuring revenue above the top end of guidance and non-GAAP profitability well ahead of the company’s outlook. Enterprise was solid but continues to decelerate, while the online business showed signs of life a couple quarters earlier than expected. Currency headwinds have eased even if the demand environment remains cautious based on uncertain macro conditions. Importantly, management disclosed that Zoom Phone revenue surpassed 10% of total, pointing to continued traction. Zoom lifted its outlook for the year, but mostly because of this first-quarter upside, so we are therefore holding our fair value estimate steady at $95 per share. Shares are undervalued, but we continue to prefer other wide-moat names across software.

Zoom Video Communications says its mission is "to make video communications frictionless," which it seeks to accomplish with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the pandemic lockdowns demonstrated the strength of the solutions, which combined with an expanding portfolio helps establish a narrow moat.

Narrow-moat Zoom reported upside to the top and bottom lines for its fiscal fourth quarter, featuring revenue above the top end of guidance and non-GAAP profitability well ahead of the company’s outlook. Enterprise strength continues to be overshadowed by online weakness, which we expect to normalize in the second half of the year. Currency headwinds continue to ease, while the demand environment remains cautious, with elongated sales cycles. New products are gaining traction, but remain relatively small as a percentage of revenue. The outlook for the year was mixed relative to our expectations, with revenue coming in below and non-GAAP operating income coming in better. These impacts generally offset each other and keep our fair value steady at $95 per share. We continue to prefer our wide-moat names during the prolonged software selloff.

Zoom Video Communications says its mission is "to make video communications frictionless," which it seeks to accomplish with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the COVID-19 pandemic demonstrated the strength of the solutions, which combined with an expanding portfolio helps establish a narrow moat.

Narrow-moat Zoom reported solid results for its fiscal third quarter, featuring revenue slightly above the top end of guidance with meaningfully better profitability. However, it provided guidance that was slightly lower than our model for the fourth quarter. Enterprise strength continues to be overshadowed by online weakness, while currency headwinds worsened, consistent with most of our software coverage, and sales cycles continue to elongate. Considering guidance and our expectations that macro conditions worsen, we lowered our estimates meaningfully for fiscal 2024 and are lowering our fair value estimate to $95 per share, from $115. We continue to prefer our wide moat names during the prolonged software selloff.

Zoom hosted its investor day, highlighting a resilient financial model and introducing a bevy of new products. We came away impressed with innovation that we think supports our narrow moat rating, and maintain our fair value estimate of $115 per share. Like much of our software universe, we see shares as attractive but see better risk-reward trade-offs in some of our wide-moat names that have sold off sharply over the last year. Our investment thesis remains centered around a long runway for growth as the company gains traction with Zoom Phone, Zoom Video Engagement Center, and the Zoom One platform. We see new solutions as incremental from a financial perspective over the next several years, although we think the Zoom Email and Calendar app may help convert free small and midsize business users to paid users over the coming quarters.

Zoom reported mixed results for its fiscal second quarter, featuring a revenue miss with strong profitability, and lowered outlook on both measures for the year. Enterprise strength was overshadowed by online weakness, while currency headwinds worsened, consistent with most of our software coverage, and macroeconomic conditions hurt. The firm delivered eye-popping Zoom Phone results, with seats surpassing the 4 million milestone during the quarter. Contact center was also strong and is tracking 18 to 24 months ahead of internal projections in terms of deal size. Our forecast was previously skewed to the top end of guidance range, but after results and a guide down, we are lowering our growth and margin profile by several hundred basis points each throughout our forecast, and therefore lowering our fair value estimate to $115 per share, from $160.

Zoom Video Communications says its mission is "to make video communications frictionless," which it seeks to accomplish with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the COVID-19 pandemic demonstrated the strength of the solutions, which combined with an expanding portfolio helps establish a narrow moat.

Zoom reported solid results for its fiscal first quarter, featuring in-line revenue, strong profitability, and a slightly better outlook for profitability for the year than was previously provided. After modest model adjustments, we maintain our fair value estimate of $160 per share and see shares as attractive. We are relieved to see overall stabilization after a surge in pandemic-fueled demand followed by the inevitable slowdown, with continued strength in enterprise customers. Management characterized new solutions such as Whiteboarding, contact center, and Zoom rooms as being more than 10% of revenue in aggregate already and believes that within the next two or three years will feature a single new solution generating 10% of total revenue, which we view as a positive indicator for long-term growth.

While Zoom reported fourth-quarter results that exceeded the high end of guidance for both revenue and non-GAAP operating profit, we are significantly reducing our value estimate to $160 per share, from $260 per share, based on guidance that was meaningfully short of our model and FactSet consensus for fiscal 2023. In turn, we have reduced confidence in Zoom's longer-term outlook as online customers churn off and enterprise growth cannot make up the difference. Accordingly, we are lowering our growth and margin expectations by several hundred basis points in each year of our discrete 10-year forecast as we struggle to define Zoom's normalized financial model post-COVID-19.

Zoom Video Communications says its mission is "to make video communications frictionless," which it seeks to accomplish with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the COVID-19 pandemic demonstrated the strength of the solutions, which combined with an expanding portfolio helps establish a narrow moat.

Zoom Video Communications says its mission is "to make video communications frictionless," which it seeks to accomplish with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the COVID-19 pandemic demonstrated the strength of the solutions, which combined with an expanding portfolio helps establish a narrow moat.

We are raising our fair value estimate for narrow-moat Zoom after the company reported third-quarter results that exceeded the high end of guidance and provided a fourth quarter outlook that was also better than expected. The company's continued pivot to larger customers was evident this quarter, while Zoom Phone remained strong and churn continued to normalize. We remain impressed by Zoom’s ability to over-deliver simultaneously in terms of both growth and margins. We see a long runway for growth as the company gains traction with Zoom Phone and evolves its main application to a unified communication platform with the recent chat launch and the pending release of video engagement center.

After reconsidering Zoom Video Communications' dramatic shift during the lockdowns and how that leaves the firm better positioned, we are raising our moat rating to narrow from none and our moat trend rating to positive from stable. In our view, Zoom has demonstrated a moat based primarily on switching costs, with network effects also supporting this position. The circumstances of the pandemic benefited Zoom in a unique way that leaves it better positioned, while its expanding portfolio leads to a strengthening trend. We are maintaining our $252 fair value estimate and see the shares as fairly valued.

Zoom Video Communications says its mission is "to make video communications frictionless," which it seeks to accomplish with a unified, video-first communications platform that incorporates video, voice, chat, and content sharing. The company offers a differentiated peer-to-peer technology, complete with proprietary routing technology. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $100 billion market for collaboration software with its ease of use and superior user experience. We think the COVID-19 pandemic demonstrated the strength of the solutions, which combined with an expanding portfolio helps establish a narrow moat.